In the past five years, state oil firm Saudi Aramco has moved from being primarily a crude exporter to pushing an ambitious agenda to help Riyadh industrialise the kingdom to create wealth and employment for its millions of citizens.

At the heart of these plans are Aramco’s efforts to increase its domestic refining capacity by 1.2 million barrels a day (b/d), with three schemes being developed at Jubail, Yanbu and Jizan. Not only will these projects provide essential gasoline and diesel for the kingdom, they will also supply feedstock for petrochemicals production, such as butane and propane.

Naphtha and natural gas liquids from refineries are used extensively in other parts of the world, where gas is more expensive or more difficult to source.

“Gas is a scarce commodity in the kingdom and its most efficient use is in power plants,” says an oil and gas analyst based in Saudi Arabia. “This means liquid feedstock is going to play a vital role in the future of [Saudi Arabia’s] petrochemicals industry.”

Integrated production

The $9.6bn Saudi Aramco Total Refining and Petrochemical Company (Satorp) facility is the first of the three greenfield refining projects to come onstream. The 400,000 b/d refinery, located in Jubail, should be operating at full capacity early this year.

Liquid feedstock is going to play a vital role in the future of [Saudi Arabia’s] petrochemicals industry

Saudi Arabia-based oil and gas analyst

About 72 per cent of its output will be gasoline and diesel. Jet fuels will also be produced, as well as some base petrochemicals, including paraxylene, benzene and propylene. Some of the gasoline and diesel will be exported, with the rest used to meet domestic demand, which is currently growing at 5-7 per cent a year.

The base petrochemicals produced in the first phase will be sold to the adjacent $20bn Sadara Chemical complex, which is currently under construction, and other petrochemicals producers in the kingdom.

Satorp is a joint venture of Aramco and French oil company Total and the partners are already formulating plans for a second phase. The second phase will not add further refining capacity, but will instead focus on producing petrochemicals from liquid feedstock sourced from within the complex. All chemicals produced will complement, not compete against, Sadara Chemical.  

The idea of using liquid feedstock to produce petrochemicals is becoming the cornerstone of Aramco’s future downstream aspirations and is a strategy aimed at fully utilising the kingdom’s ample natural resources. The Satorp project is a model Aramco plans to replicate at all its current and future refineries.

All its existing wholly owned refineries as well as the three new complexes will be involved in what is being called the Refinery Petrochemicals Integration Initiative.

The Satorp complex will provide both Sadara Chemical and its own second phase with feedstock for petrochemicals production. Aramco has identified another three sites where it wants to emulate this model in order to create jobs and broaden its refined products customer base.

The second greenfield plant is being built at Jizan Economic City (JEC), in the southwest of the kingdom. The 400,000 b/d, $7bn refinery is planned as the anchor tenant for JEC and Aramco is already in negotiations with the local Farabi Petrochemicals to build a new plant using feedstock from the facility.

Ambitious plans

The development of the Jizan refinery has not been without its challenges; construction has fallen behind schedule due to logistical issues relating to its remote location. Aramco, however, is committed to making the project a success and is looking to build its own petrochemicals plants next to the scheme.

“There is no doubt Jizan is a pet project of Aramco and it is admirable what it is doing to rejuvenate an extremely remote area,” says the oil and gas analyst. “It is an expensive project, but [Aramco] has Riyadh’s full support.”

The company’s plans for Jizan are ambitious, but they are dwarfed by schemes under consideration for Yanbu Industrial City on the Red Sea coast.

The $10bn Yanbu Aramco Sinopec Refining Company (Yasref) is an almost identical project to the Satorp scheme in Jubail and is a joint venture of Aramco and China’s Sinopec. The project is under way and will produce 400,000 b/d when completed in 2015. 

There is a real sense of expectation regarding Yanbu. It is not as developed as Jubail [so has] scope to expand

Senior petrochemicals executive

There have been no reports of a second phase as yet, due to the project still being 12 months away from commissioning. However, MEED reported in late August that up to $50bn could be spent on a cluster of huge petrochemicals complexes using feedstock from Yasref and Aramco’s existing 240,000 b/d wholly owned Yanbu refinery.

“There is a real sense of expectation regarding Yanbu,” says a senior executive from a petrochemicals company. “It is not as developed as Jubail and therefore has the scope to expand its manufacturing base.”   

Existing refineries

Aramco also operates the PetroRabigh refinery and petrochemicals complex on the Red Sea coast between Yanbu and Jeddah.

PetroRabigh is a joint venture of Aramco and Japan’s Sumitomo Chemical, which each own 37.5 per cent. A further 25 per cent is traded on the Saudi Stock Exchange (Tadawul). PetroRabigh produces 400,000 b/d, as well as 2.4 million tonnes a year (t/y) of chemicals.

The complex is undergoing a second phase expansion, which will see chemicals production increase by 3 million t/y.

Saudi Arabia’s existing refining capacity is split between two long-established joint ventures, as well as Aramco’s wholly owned facilities at Ras Tanura, Jeddah, Yanbu and Riyadh.

The two joint ventures are with the UK/Dutch Shell Group and the US’ ExxonMobil. The Saudi Aramco Shell Refinery Company (Sasref) joint venture was established in 1981 and started operations in 1985. It is based in Jubail and has a capacity of 310,000 b/d. Saudi Aramco Mobil Refinery Company (Samref) started production at Yanbu in 1984 and has a 400,000 b/d capacity.

Both facilities are predominantly export focused and have recently undergone clean fuels programmes to lower the sulphur levels of the respective product slates.

Ras Tanura, wholly owned by Aramco, is the largest oil refinery in the Middle East and has a capacity of 500,000 b/d. The facility is located north of Jubail in the Eastern Province and has been in operation in some form since 1945. 

Aramco is planning a $3bn expansion at Ras Tanura that will involve rehabilitating the existing facilities and adding petrochemicals production. Aromatics, such as paraxylene and naphtha, are to be produced and the sulphur content of the existing products will be lowered.

The engineering, procurement and construction (EPC) tenders for the project were expected to be awarded in 2013, but this is now expected to be delayed until late 2014 at the earliest.

“The bids for the EPC packages were high and Aramco wants them to be lower,” says a contracting source. “It will now be retendered later in the year.”

Driving production

Due to the sheer size of the refinery, Ras Tanura is one of the key sites identified by Aramco for its petrochemicals integration initiative, although all plans are still very much at the feasibility stage.

Aramco’s three other refineries are much smaller in scale, with capacities ranging from 90,000 b/d to 240,000 b/d. All are being rehabilitated to lower the sulphur content of the products produced and predominately provide the domestic market with gasoline, diesel and fuel oil.

By the end of the decade, Saudi Arabia will be one of the world’s largest refiners and it is clear it plans to fully utilise the output to drive its industrialisation plans and generate additional revenues through exports.

Driving petrochemicals production via liquid feedstock is the method Aramco has chosen to ensure wealth and job creation. With vast natural resources to back up this strategy, the crucial role oil refining is going to play is reflected in the tens of billions of dollars being been made in the sector.